Dr Dre heads to Silicon Valley after Apple buys Beats

Veteran rap impresario Dr Dre, famed for expletive-laden songs about the Los Angeles neighbourhood where he grew up, will be spending a lot more time some 400 miles further north, in Apple’s Silicon Valley headquarters, after finally selling his premium headphones and music streaming business Beats.

The iPhone and iPad giant is paying $3 billion (£1.8 billion) to Dre and other shareholders in Beats — slightly less than the $3.2 billion that was mooted when news leaked earlier this month amid speculation Apple haggled over the price.

The other big winner is US music industry veteran Jimmy Iovine, the guru behind the Interscope Geffen A&M record label. He co-founded Beats in 2008 with Dre, whose real name is Andre Young. Both men will join Apple.

Carlyle Group — which bought a 50% stake last year when Beats was valued at $1 billion — and the world’s biggest music label, Universal Music, led by Briton Lucian Grainge, are also cashing in.

Apple chief executive Tim Cook, announcing the company’s biggest acquisition, stressed the Beats Music streaming service first, despite the fact it launched only months ago, rather than the more established headphones business. That suggests he is particularly keen to use the acquisition to shore up Apple’s sales of music. The downloads market, which is dominated by Apple’s iTunes store, has seen sales decline sharply because of Spotify and other streaming services.

Apple cemented its status as a hip brand by forging links with the music industry via its iPod more than a decade ago. But as sales of the listening device suffered recent annual falls of 50%, some questioned whether Cook was as keen on music as Apple’s late founder Steve Jobs.

Cook answered that with the Beats deal, declaring: “Music is such an important part of all of our lives.”

He also said the acquisition could improve links between the music and film industry in LA, which has been suspicious of the dominance of Silicon Valley’s tech industry and the way it has forced down the cost of creative content. “The ugly truth is that there is such a Berlin Wall between Silicon Valley and LA,” said Cook.

Beats headphones are known for their high quality and high margins, selling for upwards of £250. A well-placed source said Facebook also looked at buying Beats.

Some analysts have been critical of Apple, suggesting it has struggled to innovate since the 2010 launch of the iPad and that the Beats acquisition suggests a lack of ideas.